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Which would you use to measure the risk of an individual stock, standard deviation, variance or...

Which would you use to measure the risk of an individual stock, standard deviation, variance or beta?

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Answer #1

Standard deviation is used to measure the total risk of a stock ie Systematic and unsystematic risk. Standard distribution uses normal distribution

Beta is used to measure only systematic risk.

Systematic risk is risk that cannot be eliminated by diversification

Unsystematic risk can be mitigated by diversification. It is assumed an investor diversifies his portfolio hence eliminates unsystematic risk. The extra return that he receives is for undertaking systematic risk.

BETA IS USED FOR MEASURING RISK OF AN INDIVIDUAL STOCK

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